The Battle of BAS: Why Small Businesses Struggle and How to Fix It

By David Rosenthal, Practice Lead, Retinue Accounting 

Procrastination is something we all know too well — that nagging feeling that you should do something but keep putting it off. For small business owners, this often shows up in the form of overdue tax obligations. In fact small businesses currently owe over $33 billion of Australia’s $50.2 billion in collectable debt. 

A huge chunk of this debt comes from unpaid Business Activity Statements (BAS), with $23 billion owed in this area alone. So why do so many small businesses struggle with lodging and paying their BAS, even though it’s a regular and necessary task? Let’s dig into the issue and explore some ways to solve it. 

What is BAS? 

Business Activity Statements (BAS) are a form that helps the Australian Tax Office (ATO) stay up to date with your business’s tax obligations. It focuses mainly on two areas: Goods and Services Tax (GST) and Pay As You Go (PAYG) withholding. In other words, it’s a key part of keeping your business compliant with the ATO. 

Here’s a quick breakdown of what it involves: 

• GST reporting: You need to report the GST collected from your sales and claim credits for the GST you’ve paid on purchases. 

• PAYG reporting: You must report how much tax you’ve withheld from your employees’ wages and salaries. 

• PAYG Instalments: Refers to the prepayments of income tax by businesses or individuals. If you’ve previously paid tax (based on your income), the Australian Taxation Office (ATO) may require you to make these instalment payments throughout the year. 

For most small businesses with less than $2 million in GST turnover, BAS must be lodged quarterly. You can find specific lodgement dates and any exceptions on Retinue’s website. 

Why Do Businesses Fall Behind on BAS? 

Running a small business comes with its fair share of challenges, and BAS often feels like just one more headache. Many business owners are so busy juggling day-to-day tasks that they either forget about lodgement dates or don’t have the time to estimate and prepare what they owe. This can lead to serious cash flow problems if you haven’t set aside enough money to cover your BAS obligations. 

On top of that, keeping track of all your transactions and paperwork can feel overwhelming, especially if you’re not using accounting software or, worse, trying to do everything manually. It’s easy to keep pushing BAS aside until it’s too late or the obligations accumulate. Unfortunately, by the time the deadline arrives, you may find yourself facing time penalties, making it harder to catch up and creating a cycle of unpaid BAS. 

The Risks of Unpaid BAS 

The ATO has noticed the high levels of unpaid BAS and is taking a firmer stance and increased recovery efforts. Businesses that owe more than $100,000 in tax debts overdue by more than 90 days could even find their debts reported to credit agencies. 

The days of post-COVID leniency from the ATO are over, and small businesses need to take action to stay out of trouble. 

A Director Penalty Notice (DPN) is also a serious matter for company directors, as it holds you personally liable for certain company debts. If your BAS lodgements are late, these debts can remain enforceable, even if the company goes into liquidation. It’s crucial to stay on top of your lodgements to avoid personal liability. 

How to Stay on Top of BAS 

BAS isn’t going anywhere, and ignoring it will only cause more problems down the road. But with a few smart strategies, you can avoid the stress and get ahead of your BAS obligations. Here are a few tips to help: 

• Keep track of deadlines  – Make sure you know your lodgement dates and set reminders so they don’t sneak up on you. Submitting your BAS on time is key to avoiding penalties and last-minute panic.
• Set aside money regularly – To prevent cash flow issues, start setting money aside in advance. Consider opening a separate bank account just for your BAS obligations so you’re prepared when the time comes.
• Invest in accounting software – Manually tracking transactions is a huge time-waster. Tools like Xero or MYOB can help you automate your bookkeeping and stay on top of your numbers. This will make it easier to lodge BAS and avoid mistakes.
• Get professional help – If BAS feels like too much to handle, consider hiring an accountant. They’ll be up to date on the latest tax laws and deadlines, and could ultimately save you time and money. Outsourcing this task also takes the pressure off, letting you focus on other aspects of running your business. 

Wrapping It Up 

BAS is just part of the tax landscape for Australian small businesses, and while it may seem like a hassle, it’s essential to stay compliant. With the ATO cracking down on unpaid debt, businesses can’t afford to put off their BAS obligations.  

By staying on top of deadlines, setting aside money, using technology, and seeking professional help when needed, you can ensure your business stays compliant and avoid any unnecessary stress. In the long run, this will help your business not only survive, but thrive.